One final effort to work this blockchain obsession out of my system so I can get on to some exciting other IoT news!

I couldn’t resist summarizing for you the key points in”Blockchain: the solution for transparency in product supply chains,” a white paper from Project Provenance Ltd., a London-based collective (“Our common goal is to deliver meaningful change to commerce through open and accessible information about products and supply chains.”).

If you’ve followed any of the controversies over products such as “blood diamonds” or fish caught by Asian slaves & sold by US supermarkets, you know supply chains are not only an economic issue but also sometimes a vital social (and sometimes environmental) one. As the white paper warns:

“The choices we make in the marketplace determine which business practices thrive. From a diamond in a mine to a tree in a forest, it is the deepest darkest ends of supply chains that damage so much of the planet and its livelihood.”

Yikes!

Now blockchain can make doing the right thing easier and more profitable:

“Provenance enables every physical product to come with a digital ‘passport’ that proves authenticity (Is this product what it claims to be?) and origin (Where does this product come from?), creating an auditable record of the journey behind all physical products. The potential benefits for businesses, as well as for society and the environment, are hard to overstate: preventing the selling of fake goods, as well as the problem of ‘double spending’ of certifications present in current systems. The Decentralized Application (Dapp) proposed in this paper is still in development and we welcome businesses and standards organizations to join our consortium and collaborate on this new approach to understanding our material world.”

I also love Provenance’s work with blockchain because it demonstrates one of my IoT “Essential Truths,” namely, that we must share data rather than hoard it. The exact same real-time data that can help streamline the supply chain to get fish to our stores quicker and with less waste can also mean that the people catching it are treated fairly. How cool is that? Or, as Benjamin Herzberg, Program Lead, Private Sector Engagement for Good Governance at the World Bank Institute puts it in the quote that begins the paper, Now, in the hyper-connected and ever-evolving world, transparency is the new power.

While I won’t summarize the entire paper, I do recommend that you so, especially if blockchain is still new to you, because it gives a very detailed explanation of each blockchain component.

Instead, let’s jump in with the economic benefits of a blockchain and IoT-enabled supply chain, since most companies won’t consider it, no matter what the social benefits, if it doesn’t help the bottom line. The list is long, and impressive:

“Interoperable: A modular, interoperable platform that eliminates the possibility of double spending

Auditable: An auditable record that can be inspected and used by companies, standards organizations, regulators, and customers alike

Cost-efficient:A solution to drastically reduce costs by eliminating the need for ‘handling companies’ to be audited

Applying it to a specific need, such as documenting that a food that claims to be organic really is, blockchain is much more efficient and economical than cumbersome current systems, which usually rely on some third party monitoring and observing the process. As I’ve mentioned before, the exquisite paradox of blockchain-based systems is that they are secure and trustworthy specifically because no one individual or program controls them: it’s done through a distributed system where all the players may, in fact, distrust each other:

“The blockchain removes the need for a trusted central organization that operates and maintains this system. Using blockchains as a shared and secure platform, we are able to see not only the final state (which mimics the real world in assigning the materials for a given product under the ownership of the final customer), but crucially, we are able to overcome the weaknesses of current systems by allowing one to securely audit all transactions that brought this state of being into effect; i.e., to inspect the uninterrupted chain of custody from the raw materials to the end sale.

“The blockchain also gives us an unprecedented level of certainty over the fidelity of the information. We can be sure that all transfers of ownership were explicitly authorized by their relevant controllers without having to trust the behavior or competence of an incumbent processor. Interested parties may also audit the production and manufacturing avatars and verify that their “on-chain” persona accurately reflects reality.”

The white paper concludes by also citing an additional benefit that I’ve mentioned before: facilitating the switch to an environmentally-sound “circular economy,” which requires not only tracking the creation of things, but also their usage, trying to keep them out of landfills. “The system proposed in this paper would not only allow the creation (including all materials, grades, processes etc) and lifecycle (use, maintenance etc) to be logged on the blockchain, but this would also make it easy to access this information when products are returned to be assessed and remanufactured into a new item.”

Please do read the whole report, and think how the economic benefits of applying blockchain-enabled IoT practices to your supply chain can also warm your heart.

As I’ve written before, the ability to instantly share (something we could never do before) real-time data about your assembly line’s status, inventories, etc. with your supply chain can lead to unprecdented integration of the supply chain and factory, much of it on a M2M basis without any human intervention. It seems to me that the blockchain can be the perfect mechanism to bring about this synchronization.

A brief reminder that, paradoxically, it’s because blockchain entries (blocks) are shared, and distributed (vs. centralized) that it’s secure without using a trusted intermediary such as a bank, because no one participant can change an entry after it’s posted.

Complementing the IBM video I included in my last post on the subject, here’s one that I think succinctly summarizes blockchain’s benefits:

A recent LoadDelivered article detailed a number of the benefits from building your supply chain around blockchain. They paralleling the ones I mentioned in my prior post regarding its security benefits, of using blockchain to organize your supply chain (with some great links for more details):

“Recording the quantity and transfer of assets – like pallets, trailers, containers, etc. – as they move between supply chain nodes (Talking Logistics)

Sharing information about manufacturing process, assembly, delivery, and maintenance of products with suppliers and vendors.”

That kind of information, derived from real-time IoT sensor data, should be irresistible to companies compared to the relative inefficiency of today’s supply chain.

The article goes on to list a variety of benefits:

“Enhanced Transparency. Documenting a product’s journey across the supply chain reveals its true origin and touchpoints, which increases trust and helps eliminate the bias found in today’s opaque supply chains. Manufacturers can also reduce recalls by sharing logs with OEMs and regulators (Talking Logistics).

Greater Scalability. Virtually any number of participants, accessing from any number of touchpoints, is possible (Forbes).

Increased Innovation. Opportunities abound to create new, specialized uses for the technology as a result of the decentralized architecture.”

Note that it the advantages aren’t all hard numbers, but also allowing marketing innovations, similar to the way the IoT allows companies to begin marketing their products as services because of real-time data from the products in the field. In the case of applying it to the supply chain (food products, for example), manufacturers could get a marketing advantage because they could offer objective, tamper-proof documentation of the product’s organic or non-GMO origins. Who would have thought that technology whose primary goal is increasing operating efficiency could have these other, creative benefits as well?

Applying blockchain to the supply chain is getting serious attention, including a pilot program in the Port of Rotterdam, Europe’s largest. IBM, Intel, Cisco and Accenture are among the blue-chip members of Hyperledger, a new open source Linux Foundation collaboration to further develop blockchain. Again, it’s the open source, decentralized aspect of blockchain that makes it so effective.

“the peer-to-peer, decentralized architecture of blockchain has the potential to trigger a new wave of innovation in how supply chain applications are developed, deployed, and used….(becoming) the new operating system for Supply Chain Operating Networks“

It’s also another reminder of the paradoxical wisdom of one of my IoT “Essential Truths,” that we must learn to ask “who else could share this information” rather than hoarding it as in the past. It is the very fact that blockchain data is shared that means it can’t be tampered with by a single actor.

What particularly intrigues me about widespread use of blockchain at the heart of companies’ operations and fueled by real-time data from IoT sensors and other devices is that it would ensure that privacy and security, which I otherwise fear would always be an afterthought, would instead be inextricably linked with achieving efficiency gains. That would make companies eager to embrace the blockchain, assuring their attention to privacy and security as part of the deal. That would be a definite win-win.

Most important of those is customer loyalty, brought about by dramatic shifts both in product designs and how they are marketed.

Much of this results from the IoT lifting the veil of Collective Blindness to which I’ve referred before: in particular, our prior inability to document how products were actually used once they left the loading dock. As I’ve speculated, that probably meant that manufacturers got deceptive information about how customers actually used products and their degree of satisfaction. The difficulty of getting feedback logically meant that those who most liked and most hated a product were over-represented: those who kinda liked it weren’t sufficiently motivated to take the extra steps to be heard.

Now, by contrast, product designers, marketers, and maintenance staffs can share (that critical verb from my Circular Company vision!) real-time data about how a product is actually operating in the field, often from a “digital twin” they can access right at their desks.

Why’s that important?

It can give them easy insights (especially if those different departments do access and discuss the data at the same time, each offering its own unique perspectives, on issues that will build customer loyalty:

what possible maintenance problems can we spot in their earliest stages, so we can put “predictive maintenance” services into play at minimal cost and bother to the customer?

I got interested in this issue of product design and customer loyalty while consulting for IBM in the 9o’s, when it introduced the IBM PS 2E (for Energy & Environmental), a CES best-of-show winner in part because of its snap-together modular design. While today’s thin-profile-at-all-costs PC and laptop designs have made user-friendly upgrades a distant memory, one of the things that appealed to me about this design was the realization that if you could keep users satisfied that they were on top of new developments by incremental substitution of new modules, they’d be more loyal and less likely to explore other providers.

In the same vein, as GE has found, the rapid feedback can dramatically speed upgrades and new features. That’s important for loyalty: if you maintain a continuing interaction with the customer and anticipate their demands for new features, they’ll have less reason to go on the open market and evaluate all of your competitors’ products when they do want to move up.

Equally important for customer loyalty is the new marketing options that the continuous flow of real-time operating data offer you. For a growing number of companies, that means they’re no longer selling products, but leasing them, with the price based on actual customer usage: if it ain’t bein’ used, it ain’t costing them anything and it ain’t bringing you any revenue!

Examples include:

jet turbines which, because of the real-time data flow, can be marketed on the basis of thrust generated: if it’s sitting on the ground, the leasee doesn’t pay. The same real-time data flow allows the manufacturer to schedule predictive maintenance at the earliest sign of a problem, reducing both its cost and the impact on the customer.

Siemens’s Mobility Services, which add in features such as 3-D manufactured spare parts that speed maintenance and reduced costs, keeping the trains running.

At its most extreme is Caterpillar’s Reman process, where the company takes back and remanufactures old products, giving them a new life — and creating new revenues — when competitors’ products are in the landfill.

Loyalty can also be a benefit of IoT strategies for manufacturers’ own operations as well. Remember that the technological obstacles to instant sharing of real-time data have been eliminted for the supply chain as well. If you choose to share it, your resupply programs can also be automatically triggered on a M2M basis, giving an inherent advantage to the domestic supplier who can get the needed part there in a few hours, versua the low-cost supplier abroad who may take weeks to reach your loading dock.

It may be harder to quantify than quality improvements or streamlined production through the IoT, but that doesn’t mean that dependable revenue streams from loyal customers aren’t an important potential benefit as well.

smart maintenance: use mobile to call up SAP order & create messages, take photos. Example of malfunction with a drawbridge. Technician got new button from stock, installed it, customers didn’t even know there was a problem.

port monitor: digital map with all info to operate the harbor. Mobile version on iPad.

SmartSwitch for rail: sensors on the switches to measure conditions. Automated data flow to maintenance company.

dynamic info on traffic volumes: combines all real-time data on traffic. Detects available parking spaces. Created “PrePort Parking” as holding area for trucks that are early or late. Trucks park bumper-to-bumper for maximum efficiency.

Kaeser Compressors also made paradigm shift: no longer sell air compressors, but air — must guarantee it works constantly. Million data points per compressor daily. Differentiates them from competitors.

one tractor company now can recommend to farmers what they should plant based on data from sensors on the plows.

Hmm. Never been to Vegas before: seems designed to bring out the New England Puritan in me. I’ll pass on opulence, thank you very much…

SAP HANA/ IoT Conference

Up front, very interested in a handout from Deloitte, “Beyond Linear,” which really is in line with speech I’ll give here tomorrow on the IoT “Essential Truths,” in which one of my four key points will be that we need to abandon the old, linear flow of data for a continuous cyclical one. According to Deloitte’s Jag Bandia,

“Among users with a complete, 360-degree view of relevant data for each specific process can help avoid missed opportunities. The ‘all data’ approach means relevant data can and should come from anywhere — any application, any system, any process — not just the traditional channels associated with the process.”

Bravo!

First speaker: SAP Global Customers Operations CTO Ifran Khan:

“digital disruption”: catalyst for change & imperative to go digital.

digression about running going digital (I put in my 30 minutes this morning!!!), creating a totally new way of exercising (fits beautifully with “Smart Aging“!)

new macro tech trends are enabling digitalizations: hyper-connectivity, super computing, cloud computing, smart world, and cybersecurity (horrifying stat about how many USB sticks were left in dry cleaning!)

those who don’t go digital will go under…. (like John Chambers’ warning about IoT).

new opportunities in wide range of industries

need new digital architectures — “driving locality of data, integrated as deep as possible into the engine.

Fasten your seatbelts! I think I’ve finally zeroed in on the Internet of Things’ (IoT’s) most important potential economic benefit and how it could simultaneously help us escape the growing global environmental crisis:

make real-time IoT data* the hub of a circular economy and management mentality. It’s both good for the bottom line and the planet.

I started writing about circular business models back in the 90’s, when I consulted on profitable environmental strategies, i.e., those that were good both for the corporate bottom line and the planet. It galled me that executives who railed about eliminating inefficiency thought reducing waste was for tree-huggers. Semantics and lifestyle prejudices got in the way of good strategy.

Ford’s River Rouge Plant (1952 view)

I could see that it was vital that we get away from old, linear models that began with extracting resources and ended with abandoned products in landfills. Ford’s massive 1 x 1.6 mile River Rouge Plant, the world’s largest integrated factory, was the paradigm of this thinking: ore was deposited at one end, made into steel, and cars came out the other (Hank’s penchant for vertical integration even led him to buy rubber plantations! If you have any illusions about the ultimate impossibility of top-down control, watch the PBS documentary on Ford — he simply couldn’t share power, even with his own son — and it almost ruined the company). The linear model worked for a long time, and, truth to tell, it was probably the only one that was feasible in the era of paper-and-pencil information flow: it was so hard to gather and transmit information that senior management controlled who got what information, and basically threw it over the transom to the next office.

As for any kind of real-time information about what was actually happening on the factory floor: fugetaboutit: all that was possible was for low-level functionaries to shuffle along the assembly line, taking scheduled readings from a few gauges and writing them on a clipboard. Who knew if anyone ever actually read the forms, let alone made adjustments to equipment based on the readings?

Fast forward to 2015, and everything’s changed!

The image of the circular corporation popped back into my head last week while I was searching for an image of how the IoT really can change every aspect of corporate operations, from product design to supply chain management. I was happily surprised that when I Googled “circular economy” I found a large number of pieces, including ones from consulting gurus Accenture and McKinsey (the most comprehensive report on the concept is probably this one from the Ellen MacArthur Foundation), about the bottom-line and environmental benefits of switching from a linear (‘take-make-dispose’) pattern.

But how to make the circular economy really function? That’s where the IoT comes in, and, in my estimation, is THE crucial element.

When that happens, a number of crucial changes that were impossible in the era of linear operations and thinking and limited data became possible for the first time:

you can optimize assembly line efficiency because all components of the factory are monitored by sensors in real time, and one process can activate and regulate another, and/or managers and assembly-line workers can fine-tune processes (think of the 10,000 sensors on the GE Durathon battery assembly line).

you can integrate the assembly line with the supply chain and distribution and sales network as never before (provided that you share the real-time data with them), so materials are delivered on a just-in-time basis) and production is dictated by real-time data on sales (the SAP smart vending machine, integrated with logistics, is a great example).

you can optimize product redesign and upgrades and speed the process, because sensor data from the products as they are actually used in the field is immediately fed back to the designers, so they have objective evidence of what does, and doesn’t work properly (think of how GE has improved its product upgrade process). No more ignorance of how your products are actually used!

from an environmental standpoint, having sensors on key components can make it possible for you to recover and profitably remanufacture them (closing the loop) rather than having them landfilled (I was excited to learn that Caterpillar has been doing this for 40 years (!) through its Reman Program, which “reduces costs, waste, greenhouse gas emissions and need for raw inputs.”).

As I’ve written before, creating the real-time data is perhaps the easier part: what’s harder is the paradigm shift the circular economy requires, of managers learning to share real-time data with everyone inside the enterprise (and, preferably, with the supply chain, distribution network, retailers, and, yes, even customers). When that happens, we will have unprecedented corporate efficiency, new revenue streams, satisfied customers, and, equally important reduce our use of finite resources, cut pollution, and tread lightly on the earth. There you have it: the secret to 21st-century profitability is:

real-time IoT data, at the hub of the circular enterprise.

*Oh yeah, please don’t drop a dime on me with the grammar police about the title: in fact, I’m a retired colonel in the Massachusetts Grammar Police, but I’ve given up the fight on “data.” From my Latin training, I know that data are the plural form of datum, but datum is used so infrequently now and data with a singular verb has become so common that I’ve given up the fight and use it as a singular noun. You can see the issue debated ad nauseum here …

“Leading companies are now finding that a green supply chain doesn’t just improve the public’s perception of their company and brand; it can save money by using resources more efficiently and reducing waste. It can also help to manage risk by insulating a company from shortages and price shocks, and by reducing the chances that a supplier will do something that gets them in hot water.”

It continues by identifying five key factors to reduce:

“Leading companies create value by modifying their supply chains to manage five key inputs and outputs: energy, carbon, water, materials and waste. These five resources are ubiquitous throughout the supply chain and thus offer vast potential for improved efficiency and cost reduction. Energy is expensive to use; carbon, in the form of emissions, represents dollars gone up in smoke; scarcity and commodity inflation are driving up the price of water and materials; and waste is a potential profit thrown away.”

In my speeches on the “Zero-Waste Economy,” I used to suggest that executives that were contemptuous of tree-hugging environmentalists and could care less about generating wastes should just substitute the work inefficiencies for waste. What hard-nosed company could justify inefficiency?

It’s great to see that the message is finally getting mainstream acceptance, and I really do think that the IoT will boost supply chain efficiency and thereby reduce environmental impacts by allowing everyone in the supply chain who needs operating data to share it simultaneously and in real time.

So there’s really no excuse any more for not practicing smart environmentalism, is there?

PS: To get the specifics about how to translate smart environmentalism into profits, check out Gil Friend’s Natural Logic. He’s got the operating manual.